A survivorship clause in a will or trust sets a specific period that beneficiaries must outlive the person who created the will or trust to inherit the assets. This survivorship requirement helps prevent your assets from passing under a beneficiary’s estate plan, rather than your own, if they only briefly outlive you. Although such cases are uncommon, adding this provision to your estate plan can be a prudent step. Consulting a financial advisor can also help ensure your estate plan aligns with your intentions and incorporates key elements like survivorship requirements effectively.
Survivorship Periods Explained
Many wills and trust documents will include a survivorship period. This clause states that the beneficiaries of the estate may not inherit assets unless they live for a certain amount of time after the person who created the trust or will passes away. This period is known as the survivorship period, and can range from five to 60 days. For instance, a trust might state that a beneficiary must survive the creator of the trust for 60 days to receive the property granted.
Usually, survivorship periods don’t surpass 60 days. If this period surpasses 120 days, it could put the tax-free estate transfer of assets to a surviving spouse at risk. While most estates won’t have to pay a federal estate tax, a long survivorship period also isn’t necessary.
Additionally, if your surviving spouse is forced to wait too long to receive property under your will (six months or more), it could harm their eligibility for the marital deduction. This applies even in the case of a qualifying trust or outright gift.
State Laws and Survivorship Periods
Even if a will doesn’t have a survivorship period, some states may require one. Many states require at least a five-day, or 120-hour, survivorship period. This law may apply to beneficiaries who inherit assets under a will, trust or state law if a will has not been completed. Generally, this law doesn’t include those who are beneficiaries of an insurance policy, a pay-on-death bank account or a surviving co-owner of property held as a joint tenancy.
States that have adopted the set of laws called the Uniform Probate Code, or the revised version of the Uniform Simultaneous Death Act, may have survivorship period requirements. To determine if your state has survivorship requirements, you may want to speak with your estate attorney to confirm.
Why Survivorship Periods Matter
Survivorship requirements apply in the case of the simultaneous (or close to simultaneous) deaths of an estate maker and the beneficiaries. Though these events are very rare, the possibility of it happening can worry many people. The worry is that if you pass away and your beneficiary passes away shortly after, your assets will go through your beneficiary’s estate plan, not yours. Essentially, you wouldn’t have control over who the new beneficiaries of your assets would be.
For example, let’s say when you pass away, you leave your estate to a sibling, with your favorite charity as an alternative beneficiary. Under normal circumstances, your assets would go to your sibling, only passing to your favorite charity if they were no longer alive at the time of your death.
However, if you pass away, and your sibling passes away 15 days after, your assets would go to your sibling’s beneficiaries under the terms of their will rather than to the charity. Both of your families would also have the financial burden of dealing with handling two probate proceedings at the same time.
However, with a 30-day survivorship period in place, the assets would never go to your sibling’s estate, instead passing to your favorite charity. Your estate plan would determine how to distribute the assets.
Bottom Line
Creating an estate plan is an important financial undertaking. Having a complete and secure estate plan in place when you pass away will leave your loved ones in a much easier spot. While adding a survivorship period isn’t essential to creating an estate plan, it can ensure the right heirs inherit your assets. DIY estate planning, with the help of estate planning software or websites, is an option for simpler estates. But you may be better off working with an estate-planning attorney. If you go this route, do your due diligence. Ask them about their practices, fees and background.
Estate Planning Tips
- A financial advisor can help you incorporate estate planning into your financial plan. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.
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